Summary
The Second Circuit reviews an FCC forfeiture order against Verizon for $46.9 million regarding its mishandling of customer location data under § 222 of the Communications Act. Verizon challenges the order on grounds that device-location data falls outside the statute's definition of customer proprietary network information, that the liability finding was arbitrary, that the penalty exceeds statutory caps, and that it violated Seventh Amendment jury trial rights. The court denies the petition, holding that device-location data is protected, the FCC's findings were reasonable, the penalty is within limits, and no Seventh Amendment violation occurred.
Topics
Practice areas
Questions Presented
- Whether device-location data qualifies as customer proprietary network information protected by 47 U.S.C. § 222.
- Whether the FCC's determination that Verizon failed to reasonably protect customer proprietary network information was arbitrary and capricious.
- Whether the FCC's calculation of 63 continuing violations exceeded the statutory forfeiture cap.
- Whether the FCC's forfeiture proceedings violated Verizon's Seventh Amendment right to a jury trial.
Holdings
- Device-location data qualifies as customer proprietary network information because it relates to the location of a telecommunications service and is made available to Verizon solely by virtue of the carrier-customer relationship.
- The FCC reasonably determined that Verizon failed to take reasonable measures to discover and protect against unauthorized access to customer proprietary network information; the liability finding was not arbitrary and capricious.
- The FCC acted within the discretion delegated by the Communications Act when it treated Verizon's separate continuing relationships with 63 entities as 63 continuing violations, rather than a single act or failure to act subject to the approximately $2 million cap.
- Assuming Verizon had a Seventh Amendment right to a jury trial, the right was not violated because Verizon could have declined to pay the forfeiture and obtained a de novo federal district court trial under 47 U.S.C. § 504(a), but instead paid the penalty and sought appellate review.
- A section 504(a) trial de novo permits the parties to challenge both the factual and legal bases of the FCC's forfeiture order, including legal and constitutional issues.
Key quotations
“In sum, we conclude that device-location data both “relates to the . . . location . . . of a telecommunications service” and is obtained “solely by virtue of the carrier-customer relationship.”” (at 19-20)
“In short, we are not deferring to the agency’s interpretation of the statute. Instead, we conclude—based on our own independent analysis of the statute—that the Communications Act vests the agency with some discretion to select, from a reasonable range of possibilities, the unit of prosecution that can be considered a single violation of the Act under particular circumstances.” (at 28)
“Textually speaking, “trial de novo” plainly indicates that the parties would start afresh in federal court, and consequently that Verizon would be able to challenge both the factual and legal bases of the FCC’s forfeiture order.” (at 36-37)
Factual background
Verizon operated a location-based services program through aggregators that supplied customer location data to third-party providers. Verizon relied substantially on contractual safeguards and an external auditor's comparison of provider-submitted location requests and consent records, but the system could not reliably detect fabricated consent records or requests made without customer consent. After reports that Securus Technologies and a former sheriff had accessed Verizon customer location data without valid authorization, Verizon terminated some access but continued providing data to dozens of entities for months. The FCC concluded that Verizon failed to reasonably safeguard customer proprietary network information and imposed a $46.9 million forfeiture.
Procedural history
The FCC issued Verizon a Notice of Apparent Liability after investigating Verizon's location-based services program and preliminarily finding violations of section 222 and the FCC's privacy regulations. After considering Verizon's written response, the FCC affirmed its findings and issued a forfeiture order. Verizon paid the penalty and timely sought review in the Second Circuit.